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In re Smith International, Inc.

United States Court of Appeals, Federal Circuit

September 26, 2017

IN RE: SMITH INTERNATIONAL, INC., Appellant

         Appeal from the United States Patent and Trademark Office, Patent Trial and Appeal Board in No. 90/012, 912.

          John R. Keville, Winston & Strawn LLP, Houston, TX, argued for appellant. Also represented by Andrew Ryan Sommer, Washington, DC; Richard L. Stanley, Law Office of Richard L. Stanley, Houston, TX.

          Mai-Trang Duc Dang, Office of the Solicitor, United States Patent and Trademark Office, Alexandria, VA, argued for appellee Joseph Matal. Also represented by Nathan K. Kelley, Frances Lynch.

          Before Lourie, Reyna, and Hughes, Circuit Judges.

          LOURIE, CIRCUIT JUDGE.

         Smith International, Inc. ("Smith") appeals from a decision of the United States Patent and Trademark Office ("the PTO") Patent and Trial Appeal Board ("the Board") affirming the examiner's rejections of claims 28-36, 39-46, 49, 50, 79-81, and 93-100[1] of U.S. Patent 6, 732, 817 ("the '817 patent") in an ex parte reexamination. Ex parte Smith Int'l, Inc., No. 2015-008323, 2016 Pat. App. LEXIS 3764 (P.T.A.B. Apr. 29, 2016) ("Board Decision"). For the reasons that follow, we reverse.

         Background

         This case primarily concerns what the word "body" means in the context of the '817 patent. Smith owns the '817 patent, entitled "Expandable Underreamer/Stabilizer, " which is directed to a downhole drilling tool for oil and gas operations. '817 patent Abstract, col. 1 l. 30. The '817 patent describes an "expandable tool 500" having "a generally cylindrical tool body 510 with a flow-bore 508 extending therethrough" and "one or more moveable, non-pivotable tool arms 520." Id. col. 7 l. 67- col. 8 l. 1, col. 8 ll. 9-10. A drilling tool described in the '817 patent is shown below:

         (IMAGE OMITTED) Id. fig. 4.

         The '817 patent describes that "one or more pocket recesses 516, " which "include angled channels 518, " are "formed in the body 510" to "provide a drive mechanism for the moveable tool arms 520 to move axially upwardly and radially outwardly into the expanded position" in response to a "[h]ydraulic force . . . due to the differential pressure of the drilling fluid between the flowbore . . . and the annulus." Id. col. 8 ll. 4-5, 20-23, col. 9 ll. 36-39. As the drilling fluid flows through the tool, "the piston 530 engages the drive ring 570, " "causing the drive ring 570 to move axially upwardly against the moveable arms 520, " which in turn causes "[t]he arms 520" "to move axially upwardly in pocket recesses 516." Id. col. 9 ll. 40-54. The '817 patent also describes an "inner mandrel 560, " which is "the innermost component within the tool 500, " and which can be replaced by "a stinger assembly" "comprising an upper inner mandrel, " "a middle inner mandrel, " and "a lower inner mandrel." Id. col. 8 ll. 36-37, col. 12 ll. 5-7. The '817 patent was originally granted with 73 claims.

         In 2012, Smith's corporate parents, Schlumberger Holdings Corp. and Schlumberger N.V. (together, "Schlumberger"), sued Baker Hughes Inc. ("Baker Hughes") in the United States District Court for the Southern District of Texas for, inter alia, infringement of the '817 patent. Baker Hughes requested ex parte reexamination of claims 28-37, 39-46, 49, and 50 of the '817 patent. The PTO granted the request for ex parte reexamination, which is the subject of appeal in this case.

         In 2016, Smith also sued Baker Hughes in the United States District Court for the District of Delaware for, inter alia, infringement of the '817 patent. Baker Hughes petitioned for two inter partes review ("IPR") proceedings challenging certain claims of the '817 patent, but the PTO denied institution noting that the substantive overlap between the IPR petitions and the reexamination on appeal in this case favored denial of institution for reasons of judicial economy. Baker Hughes Oilfield Operations, Inc. v. Smith Int'l, Inc., IPR 2016-01450, 2016 WL 8115502 (P.T.A.B. Dec. 22, 2016); Baker Hughes Oilfield Operations, Inc. v. Smith Int'l, Inc., IPR 2016-01451, 2016 WL 8115503 (P.T.A.B. Dec. 22, 2016).

         During the ex parte reexamination, Smith added and cancelled claims 74-78 and 92, cancelled claim 37, amended claims 28, 35, 36, and 43, added and amended claims 82-84, 87, and 89-91, and added claims 79-81, 85, 86, 88, and 93-102. Claims 28, 43, and 93 are the independent claims.

         Claim 28, as amended, reads as follows:

28. An expandable downhole tool for use in a drilling assembly positioned within a wellbore having an original diameter borehole and an enlarged diameter borehole, comprising:
a body; and
at least one non-pivotable, moveable arm having at least one borehole engaging pad adapted to accommodate cutting structures or wear structures or a combination thereof and having angled surfaces that engage said body to prevent said arm from vibrating in said second position;
wherein said at least one arm is moveable between a first position defining a collapsed diameter, and a second position defining an expanded diameter approximately equal ...

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